How to Get 10x EBITDA in an Industry That Trades at 5

Transcript

John Warrillow:

Before we get into today’s episode, I want to take a moment and describe a little project I’ve been working on. I’ve had the opportunity to sit here and talk to you through the voice of almost 300 guests now on Built To Sell Radio, and it’s been an absolute privilege. I’ve learned an enormous amount. And I’ve tried to distill those lessons into a new book called The Art Of Selling Your Business: Winning Strategies And Secret Hacks For Exiting On Top. It comes out on January 12th. And what I’ve tried to do is distill all of the strategies and negotiation tips used by the best-performing guests, the guests that have had the boasts spectacular exits, and put them into a bit of a game plan that you can follow.

John Warrillow:

It’s divided into three unique sections. The first, everything you need to do before you put your business on the market. The second is really about drumming up multiple offers, which gives you negotiating leverage in the sale of your company. And the third section is all about punching above your weight in a negotiation to sell your business. If you like the show, I think you’re going to like the book. January 12th, it comes out. You can pick up a copy and learn a little bit more at builttosell.com/selling.

John Warrillow:

Next up, you’re going to hear from Lee Richter, who built a veterinarian practice. She bought one at a million bucks, she built it up to $10 million, and sold it to a group rolling out veterinarian practices. And what I find really interesting about this episode is, as she will describe, Lee went out and invested in the company that acquired her business. Oftentimes, acquires insist that you carry some equity. In Lee’s case, she asked them if she could invest in their business, which as she will describe, worked out very well for Lee. Here to tell you the entire story is Lee Richter.

John Warrillow:

Lee Richter, welcome to Built To Sell Radio?

Lee Richter:

Yay. Thank you. I’m so happy to be here with you, John. What a pleasure.

John Warrillow:

Well, tell me about where you are. Because I want to switch spots with you right now. Tell me about where you are.

Lee Richter:

I am so fortunate that I designed my life so I could be in Maui at least three months a year. I’m just finishing month one, I have another month coming up. I’m in Maui. The view behind me is a reflection of what I see, which is Molokai right in front of me. I’m in a place called Kapalua, and I’m looking directly at Molokai, which is incredible, beautiful sunsets, lots of rainbows. I haven’t seen any unicorns yet, but I keep looking.

John Warrillow:

That’s awesome. Well, I want to get into what you did to manufacture such an amazing life, and I think Richter Vet is a big part of that. So let’s start off with, what does this company do? What’s the business idea like? What did you guys do?

Lee Richter:

Oh, I’m so glad you asked, because this is a story that actually started more than two decades ago, which is mind blowing to me now looking back to think, just 20 years ago, this was an idea we thought it was a really good idea. Which was, we were looking around the San Francisco Bay area for a veterinary practice to own so that my husband, who is a world-class amazing veterinarian, could actually practice the way he wanted to. And the way he wanted to was in a very giving way, but also integrative way, integrating Eastern and Western medicine. So he would have things like acupuncture and chiropractic and hyperbaric oxygen, so he started-

John Warrillow:

For dogs?

Lee Richter:

For dogs. For dogs.

John Warrillow:

Seriously?

Lee Richter:

I’m serious. We’ve even had a rooster in there. I’m telling you, hyperbaric oxygen is a miracle machine for certain things.

John Warrillow:

Seriously?

Lee Richter:

He just knows the right time to use it. It’s amazing. It’s amazing. Just like for people. And I will tell you, one of the lessons learned-

John Warrillow:

I feel like the most negligent dog owner ever.

Lee Richter:

No, no, no. It’s only if you need it for a reason. But I will say, having clients who come in and take care of their pets at that level, I’ve watched them, witnessed them take care of themselves better too. I’ve witnessed people using the gateway of the animal medicine, through learning to take care of their pets the best way possible, because they love them so much, they’ll do anything. So they will come to my husband, they will come to his team, they will learn the best ways to do it, and sure enough, their personal health starts increasing and getting better too.

Lee Richter:

It’s a gateway. It’s so beautiful. Not only are we helping animals, we’re helping all the people who love the animals because they have an open mind for integrative medicine, and when they love their pets that much, they’ll do anything. And those are my ideal clients. This is why I created Richter Vet, so people who want to take their pets’ health care into consideration like a family member. This is what they’re doing. They’re saying, “If it was my body, what would I do? Well, every quarter, I at least go to the chiropractor and get adjusted.”

Lee Richter:

And I’d look at the seasons and I’d see what foods should I be eating? What’s fresh at the farm. And I’d be taking nutrition into consideration and I’d be taking care of my hair. My hair is different in every climate, here in Maui is different than San Francisco, which is different than Colorado and Arizona. Each place is different. It’s the same for pets. So what we did was we created a world where people could come and do the best, and then they started doing the best for themselves too. So I just love that. It’s so inspiring for people.

John Warrillow:

It’s fascinating. So what was the business model? When I think of a vet, I think of a retail shop where you bring the dog in and they put them up on the scale and you buy your food there. Is that what I should visualize when I’m thinking about Richter Vet?

Lee Richter:

Well, that’s how it started. When I first purchased the hospital, it was already around for 40 years. I had 3,500 clients that came in one at a time, brought their pets in, met with the team, took care of their pets into that traditional visit, just like you just mentioned. They came in, there’s a little retail shop, there’s a team that greets them. They have a meeting with the doctor. Maybe they pick up some things on the way out, and they have their healthcare and that little experience. And what we did was we started saying, “Hey, we’re in Silicon Valley. Let’s watch how they look at the customer experience and the customer journey. Let’s see what they’re learning. How are they creating such a deep relationship? Now, can we mix our love of the customer journey with our unique way and the way we do medicine for animals? How do we mix that?”

Lee Richter:

So over time, we started adding marketing campaigns, asking our customers what they liked, started creating case studies of what worked and why it worked even better. We would do things side by side, like before a dog had surgery, one of them would have chiropractic and the client would say yes to it. But then another one who the client had said no, we could see side by side after surgery, how did they improve? Was it better and faster and less painful because they had chiropractic care before and after? Actually yes, they improved dramatically faster. And the more that we did that and we had side-by-side one, client says yes, one says no, it was our proving ground to see how effective these integrative modalities are, and so it was just encouraged us to do more.

John Warrillow:

Let me just pause there, Lee. I just want to explore, before we get too far into how you grew the business, you said that you started it, you bought a clinic, they had 3,500 patients and it was doing about a million in revenue. Is that right?

Lee Richter:

Just under a million, it was 965,000 was the highest revenue year they had had up to date in the 40 years that they had been there. Yes.

John Warrillow:

Wow, 40 years.

Lee Richter:

40 years.

John Warrillow:

And so how did you place a value on that company?

Lee Richter:

What we do is we actually went to an advisor in the veterinary industry. We interviewed three of them, and these are people that are brokers, business brokers. We knew that we’d be doing a revenue share, a percentage would go to them for the transition of the business. But we also knew that they knew the step-by-step guide, best way to get through the transaction, to make it more transaction and less the motion both for us and the seller. So we brought them in, we consulted with three of them, we asked them their business model. And then what we did was we looked at examples of their case studies and maybe it took us 30 to 45 days to choose the team that was the best fit for us.

Lee Richter:

And it actually was another husband wife team. They really understood us, they understood what we wanted. And then I went to some of my friends who had sold companies over $100 million and I asked them, what did they learn? What did they wish they knew now that is clear to them that if they had it at the beginning of the transaction, it would have been easier or more fun or just easy, lucrative and fun, as Joe Polish would say? Easy, lucrative and fun, that’s the goal. So I’m looking at the transaction, how can I make it easy, lucrative and fun for both sides?

Lee Richter:

First piece of advice I got was from my good friend, Richard Rossi, and I called Richard and I said, “Richard, what would you do?” And he said, “The first thing I would do is put $100,000 at least aside for your M&A attorney and hire the best and just make it a package so that they are on your team 100% and doing a great job and you’re not nickel and diming hours, but you have a project price on it. So I went and interviewed three M&A attorneys. I went to my family office, Jim Dew, who is my advisor, my wealth advisor. And I said to him, “Help me find the right M&A attorney.”

Lee Richter:

So he picked two, I had one, I interviewed all three of them, found the right deal, found the right person, absolutely stellar in the veterinary industry, and already worked with the past with the client that I was doing the transaction with. He had already done contracts with them. So that was phenomenal. And what I learned is because it wasn’t an M&A attorney out of New York or San Francisco where I traditionally would go, one of the higher up professionals who’s done so many of this, what happened was because it was from the veterinary industry, the truth of the matter is he was 10 cents on the dollar.

Lee Richter:

Literally, I put $100,000 there is a budget for him to grow into, and it was barely $10,000 for him to represent me the right way.

John Warrillow:

Wow. So go back to the numbers though. So 965 revenue. You talked to the three brokers, you got the M&A. What did you end up paying for this business? What proportion of it was cash versus future payments, spender, take back, all that?

Lee Richter:

I’m going to take you through a little journey of my whole reason why we picked this hospital. First of all, my husband worked emergency. And when he worked emergency, that meant he saw the results of all the surgeries and all the animals that went to emergency from all the hospitals in the San Francisco Bay area. And when we were talking about, what would be your dream hospital? He had three in mind, and this is one of them. And so when it became available, we had to literally get to work and say, “Okay, let’s put in an offer.” By the time we put in our offer, more than 20 other veterinarians had put in offers, it was that fast. And at least two of them bid more than 200,000 more than us.

Lee Richter:

So we’re looking a 965. Back then when our company did 965, it was one-to-one, that was basically what you paid. That is basically what you paid.

John Warrillow:

In other words, they were generating 965 in revenue?

Lee Richter:

They did 965,000, I paid 965,000 to get it. I went to a company called Matsko at the time, it’s now Wells Fargo bought it. I went to them and I said to them, “How could I buy this hospital and have working capital to get started?” Because what happened was, the deal came in, I wasn’t 100% ready for it yet, but I needed to be ready in my portfolio just to show how serious of a buyer we were. So I went and I got an extra, just about $100,000 in working capital, did a $1.1 million loan. It was about $13,000 a month for 10 years for the terms of that loan.

Lee Richter:

And I remember the day that we paid off that and I felt like I got a $13,000 a month raise. It was a fun day for me. I ended up reinvesting it back in the company and getting things like hyperbaric oxygen, but it still felt good to get a $13,000 a month raise for consistently paying that note on time, auto pay every month for 10 years.

John Warrillow:

So you paid about one times revenue?

Lee Richter:

So it is good to get partners. I did, I paid one times revenue, got a loan for just over 100,000 more than that. Just had working capital, literally started with zero out of pocket. All I had with sweat equity and knowledge and know-how. And the veterinarian who sold the practice, the reason he chose us were a few things. Number one, my husband is in medicine, I’m in business, so he knew the team of us would have a better chance of going through hard times, which when we bought it in 2001, right around the corner, it was 2008. So luckily those skills were in place because when we went through 2008, we were in growth spurt rather than retraction.

Lee Richter:

And a lot of our industry experts around us were definitely consolidating and taking teams half time while we were expanding because of what we were doing in our marketplace.

John Warrillow:

So the seller was getting some of their money in payments over time, which is why-

Lee Richter:

No, I got 100% payout day of.

John Warrillow:

I see. Okay, got it.

Lee Richter:

He kept on my docket, but he moved to Australia. The funny thing is, it was 9/11. He got stuck in Australia, decided to stay. He couldn’t get home because no flights would get him home during 9/11, he decided to stay in Australia, and that’s why he put his practice up for sale. And when he put his practice up for sale, it was for him to have a lifestyle to be in Australia, so he could not stay behind. He was still connected with us though. He was still an advisor, he still came to visit us at least once a year, but it was really just a friendly exchange. We actually never needed anything from him. In the beginning, we thought we would need a lot, but looking back, we really just took it and ran with it and made it ours.

John Warrillow:

Did you have to sign a personal guarantee on the loan to buy that?

Lee Richter:

Initially I did. Yes. I think at the five-year mark, I changed the terms on the loan and I took that guarantee off.

John Warrillow:

A lot of people are going to be curious to know how you can do that. They’ve had to sign a personal guarantee. What’s the secret to getting out the personal guarantee?

Lee Richter:

I made four five-year leases. I made four five year leases. At the five-year lease mark, six months before we would talk about it, I put a right of first refusal to lease, right of first refusal to buy. I put both of those in the contract. Now, you have to remember, this is 2001, not everyone was quite as savvy then as they are now. There’s a lot of Google searches on how to do things, where back then there wasn’t competition, there were not people-

John Warrillow:

You totally lost me. You totally lost me. Go back. When I was asking about personal guarantee, I meant for the loan you got to buy the business and the the working capital.

Lee Richter:

Oh, I did the loan tied in to the lease, so they were both interacting. So even if I sold the company, the lease would go with it.

John Warrillow:

The lease for the space?

Lee Richter:

For the space, but also with the mortgage company, I had an interactive. So at the five-year mark when we renewed, we renewed our Matsco loan as well. We still had that same 10-year loan, but at the five-year mark, we took the personal guarantee off. We put that in in the beginning that at five years, this would be the new terms, and we kept the same terms.

John Warrillow:

Did you own the underlying real estate or did you rent the real estate?

Lee Richter:

I wish we could have bought the real estate, it was $5 million at the time. I even tried to do a land trust and talk them into a tenured transfer of ownership. And they loved the idea, but they had five siblings who inherited and they could never agree. And in the 18 years that I had that practice, they never sold it. But what was good for me is my tax rate was from 1961 and I never wanted them to sell it. That’s why I wanted to put a land trust in place, because if they ever sold it, my rent would have gone up dramatically. My rent at the time was $20,000 a month and I didn’t want to go any higher.

John Warrillow:

My brain is exploding because I still don’t understand.

Lee Richter:

I’m sorry.

John Warrillow:

So you have to go slow for me. Just imagine you’re explaining this to a seven year old. So you’ve got a personal guarantee. You sign a personal guarantee for the loan to buy the business. You have a lease-

Lee Richter:

Right. And I have a two-part still at loan, the first one was five years for the first five years of the loan that matched my lease, then I had-

John Warrillow:

Yeah. And then the lease came up for renewal.

Lee Richter:

And then it came up for renewal for all kinds of things, for terms, for everything. And at that term, I took my personal guarantee off because now I had five-year run with the hospital. So much so that that company used this as a poster child for other veterinarians to see how to do it.

John Warrillow:

Okay. Let me see if I understand it. So at the end of the lease, you said to the bank, “Look, I’m going to re-up on this lease, so we’re going to guarantee this amazing location where all these great customers, we’ve grown the number of customers, look at all this history of the last five years.”

Lee Richter:

I didn’t have to say any of that. I said none of that, John. What I said is, “Hey, Matsco, look at the interest rates. They’re really adjusting a lot. I’d like to renew my stuff. And when I do renew it, here’s what I’d like the terms to be, go get it, make it happen. Come back.” When they did, we wrote up the new things and I did not include a personal guarantee on the second one. I already a five-year history of them paying on time, automatically pay. They did not have to worry about me being good on that loan. By the way, I used them again to buy another practice, which I needed another million dollars to build a practice from scratch. I used them again and I built that into that second…

Lee Richter:

When I did that five year, I also built in a new loan, starting a brand new practice and now I was doubling my investment with them, they were doubling their investment with me. So you’re always able to be new things, you just have a conversation and say, “Hey, you guys ready to renew this based on what’s going on today in the marketplace?”

John Warrillow:

So the second practice that you bought, same valuation formula around one times revenue?

Lee Richter:

I built it from scratch. The second one was the Holistic Vet Care. HolisticVetCare.com is online, but Holistic Vet Care is a physical, 6,000-square-foot building on Piedmont Avenue in Oakland, California. It’s very progressive. It’s right on the edge of Berkeley. It’s our perfect clientele. We live in a great zip code, Piedmont are people who really are progressive in their health care. They have the resources to take care of themselves. They always want to learn. Our demographic is just an ideal mix. So we got 6,000 square feet. I built it from scratch. I added hyperbaric oxygen. I did about a million dollars.

Lee Richter:

I figured I had a million with the other one, why not just invest a million, see what I could do. So we took it down to the stud, built it, and it’s world-class. Gary has won 50 awards in the last 10 years for his work in that veterinary industry. And a lot of it is because of Holistic Vet Care and the products that we make from there.

John Warrillow:

Got it. So you built this business up, you bought it for, it was 965. How big did you get it before you decided to sell it?

Lee Richter:

Let’s see. Just over 10 million in sales. And then when we bought it, it was one for one on last year’s sales, but when we sold it in the industry, it’s based on EBITDA. So I had to be a different kind of owner. It wasn’t just, get the numbers on the top line up, I absolutely had to be an owner considering what the bottom line was. And every single month we inched closer, higher top line, lower bottom line. We just made our profit margins grow. We had 10% or more growth every single year in business. Like I said, we won more than 50 awards in the last 10 years, we won more than that in the last 20. We just were stellar with our team.

Lee Richter:

We hired the best of the best and they just grew and multiplied together and made magic happen. Honestly, I always said, as a marketer, I could drive people to you all day long, but as a doctor, you have to keep them and make that client journey so special there’s nowhere they’d rather go. And so I think we just really were focused on the client journey and everything else fell into place. So that’s what gave us the opportunity to launch Holistic Vet Care and be pioneering in the industry, is we had a crowd source of people right there coming to us in person, and a certain percentage were ideal for that integrative medicine, so we just expanded.

Lee Richter:

So one company went 965. I think the total that we’ve received for that so far is just over $12 million in return for me and my husband, Gary. And what we’ve done, a lot of that is we’ve invested back in the company and into the future, and some of it we’ve let ride into the new companies that have taken over.

John Warrillow:

Okay. So you bought it for a million and then you sold it for around 12, is that right?

Lee Richter:

Just over 12. Yep.

John Warrillow:

Okay. That’s helpful. And the 12 sounds like a little more than one times revenue, but you’re saying that as it grew, you went from valuing based on revenue to a multiple of EBITDA.

Lee Richter:

Multiple of EBITDA. And because of our history in the industry and being pioneering, we were even able to get a greater EBITDA payout. So generally, in the veterinary industry it would be about five times EBITDA would be the payout. So we had two things in our favor. Number one, we had a world-class veterinary hospital with a huge history that was stellar, five star, absolutely amazing team, everything in place to be able to turn over, and an amazing clientele. We went from 3,500 clients to 25,000 current clients that came to see us in person, so we were able to multiply in so many ways. Our team went from three doctors to 10 doctors on staff, our RVTs, which is a registered vet nurse, went from like one to six or seven at a time. I mean, we just increased everything

John Warrillow:

And you were able to improve the EBITDA margin. You said the industry average was around five times EBITDA, what did you end up getting?

Lee Richter:

Yeah. We got 10 times EBITDA on our sale. And basically, what we did was we tied it in with our 50 awards and showed them that basically with their new formula, all 500 or plus hospitals that they have would benefit from all the awards that we’re bringing to the table because now they’re all award-winning hospitals in the brand together. So I also showed that in my PR marketing, our URL and our branding was sold through my PR marketing company, so that was a whole another separate agreement. A whole other separate agreement was just for the URL and the branding. So even though I got 12.1 for the hospital, I still had our entire branding and marketing campaign and all of that.

Lee Richter:

That was just about another seven figures added on as a separate document. And they did mention to me, no one else did that. And I’m like, “Why wouldn’t they? They own the branding. Why would they just turn over all that juice to you?” But my juice was just really, really fresh-squeezed orange juice, that it was worth the squeeze for them to pay extra to get that. And they wanted to own it and they wanted to have the IP and be able to see, “What do we do in Facebook ads? And what do we do to basically build that business more than 10 times?”

John Warrillow:

And so you carved out the brand and some of the marketing PR as a separate entity, and originally didn’t sell that as-

Lee Richter:

Everything is owned through Richter Communications and Design Group, which is my PR marketing company. My PR marketing company started in the San Francisco Bay area more than 20 years ago. I was doing work at Stanford Research Institute and at Merrill Lynch and at different companies because I have a financial background. So here I am doing work in the financial industry and in the e-learning online learning space as it was just being developed, and my husband was doing veterinary medicine. And so what happened was, as he wanted to have his own practice, I used my skills in business to get him his little… Now it’s really an entire machine that’s an entire ecosystem around Dr. Gary Richter now, but in the beginning it was the fun, things that added and things that put together.

Lee Richter:

One of our brands is called Nutra Thrive, and Nutra thrive has… we added two million people last year that just bought that to add supplements to their pets’ lifestyle. A year before, we didn’t know those two million people, now we have two more million people that are finding us online for products that we created. We go to UltimateDogHealth.com and UltimateCatHealth.com, and you can see things that have happened because we have the holistic veterinary hospital, we’re seeing what pets need for the nutrition, we’re creating it for our clients. So everything is blossoming because we’re doing something so different with Holistic Vet Care. So even though it was born out of a general practice and it was absolutely part of it, we spun it off, made a second company, and now that second company lives on even bigger than the first one.

Lee Richter:

So all the lessons we learned in the general practice, which is just like you said at the beginning of our call, which is, people show up, they have a little retail store, they have an experience, on the way out, they get something, they go home and they see their vet maybe in six more months. We’ve changed that experience, they’re coming to us sometimes weekly, sometimes quarterly, and they’re having an actual experience with us, we’re part of their pets’ health care. And in that, it also includes what supplements, just like we put supplements in our body, you go to the doctor and they run a test on you and they say, “Oh, you’re deficient in vitamin D right now, which everyone is, so take this pure vitamin D. This is the one I recommend.”

Lee Richter:

You want them to do the homework and see which one is right for you. Now, Holistic Vet Care, they’re part of your experience. They’re seeing what you’re deficient, and they’re saying, “This will help you.” That’s what we’re doing for animals. And in the ultimatedoghouse.com we learned, it’s so much easier to share it with the world online than it is one at a time in person. Seeing 25,000 people in a year in person during COVID is not really easy. During a pandemic, it’s almost easier to find people online, but pets still need to see us in person. So we had to get really nimble and quick on how to look at that client journey today and make it even better for the future. And that’s where they like to be today, is what’s bigger and better for the future.

John Warrillow:

You said something I want to circle back to, which is that you separated out your brand and you sold it separately, take me through that. So you had this transaction where you sold your company for about 12 million, did you sell the brand to the same company? Was it done at the same time? Maybe you walk through that if you could.

Lee Richter:

Absolutely. So as we were at the bargaining table and we’re saying, what is the practice worth, and I’m asking for a certain number, I wanted to make sure it was more than $10 million. That was my number. I had to be more than $10 million. And more than 12 came-

John Warrillow:

Why was that important to you?

Lee Richter:

For me, that was important because of where I’m going, where I’m going is I’m working… I’m a unicorn in the making right here, $100 million plus, 10 is on the way to 100. Finishing that transaction to me that I started so early and so young and wrapping it up in a bow, more than 10 million was very important to me. And I was going to wait until the timing to make sure I did that because that’s my story and my journey. And that story is a launching pad for other stories. When I’m talking to people about Holistic Veterinary Care, it’s based on me already building it on a more than $10 million company.

Lee Richter:

So what are the banks say? When I go to them for funding now, it’s less than 24 hours, no personal guarantee, yes, sign on the line. I can ask for a million or $2 million, based on my history, they’re going to see what I’ve done. And by the way, when do you ask when you don’t need it? So what have I been doing recently? Asking and upping all my credit lines. I’ve doubled them all. I don’t need them right now, I use them responsibly, so they see me use 50, pay 50, use 50, pay 50, just to keep them going, but I ask when I don’t need it right now, because guess what? In two years I might launch something that is $50 million and I do need to go them for five to get started. This is the time to build that.

John Warrillow:

Is your husband have a tough time getting a word in edgewise? Just wondering.

Lee Richter:

No, no, no. We have different domains. His is Madison, so he talk to Madison.

John Warrillow:

I’m just teasing you. All right. Let’s go back to the 12, if 10 million was important to you, they’re offering, I’m assuming below that, and you offered to throw in the brand and the marketing to get it North of that, is that sort of you have done?

Lee Richter:

No, actually that was a separate contract. I wanted to sell it. Once I got to the number that I was happy was more than 10 million, and I had a second bite of the apple off on deck, which made it more than 12 at that point, which was only 12 months later. Once I got it more than 10, what happened to me was it gave me part of my story for where I’m building next, because I’m building to sell the next brand. What I do with my Richter Communications and Design Group is early on, every single brand, which I have nine total right now, every single brand is owned by Richter Communications and Design Group. Every URL is there, I think nice little box in one place.

Lee Richter:

If it spins off and sells, it’s a separate contract. They don’t have to take the URL, they can do their own brand new one. However, if they want my IP, they’re going to pay for it. And they appreciated it because guess what happened, John? Smart people want to do business with smart people. And if they bought 500 hospitals and there’s a consolidation, and I’m only one that asks for a separate contract for my URL and they wanted it and they paid for it, they were appreciative that I put it in such a way that they would want it. If it was crap, they’d be like, “No, I don’t want that at all.” But I worked so hard on it.

Lee Richter:

What I did was I did define the value from the beginning, from the beginning, I said, “It’s owned by Richter Communications, then I can do whatever I want with it. Even if I sell the company, I could still own the online brands if I wanted to. So it was valuable enough to them that they wanted it. And I think everyone should think about that. When you first put your company together, look at everything as an asset, look at your branding as an asset, put it in a way in a holding company or somewhere so it can be shown as value later. And by the way, right now, I’m part of groups that are buying huge brands. One of the ones we brought was Pier 1, another one we bought was the Dressbarn, another one they’re buying right now…

Lee Richter:

All of these are globally known brands. And part of the reason they’re doing it is just to get the mailing list. It’s not going to be the same experience walking in the store, but it is people who know the brand, like the brand, and now we can nurture that client online experience like it never has been. So what we’re building into is even bigger than it ever was before.

John Warrillow:

All right. Let’s go back to the transaction. You mentioned that it was around 10, but there was a second bite of the apple, people may not know what that means. Can you talk about the structure of the deal so that it just explain what that second bite of the apple means and how that story came about

Lee Richter:

Okay. Since the company that was being built was a multi-billion dollar company and it was in the process of being set up to be bought for more than $2 billion, my little piece was 500th of the pie. But I looked at from the beginning is, “Hey, if I’m partnering with this group that’s really creating so much value, they’re going to sell it for multi-billion to another company.” I’m like, “How do I be part of that value even after I sell?” Because my stuff I put so much heart and soul and it is one of my babies, that I didn’t want to send it off and not see it go to college. And so I went to him and I said, “I’d like to take some of my proceeds and roll it over into your company so that whenever you have an event, I’m part of that as well.

Lee Richter:

And they went and got approval. They actually said that no one else asked them for that. They went and got approval, I matched it to the most amount I could, which I believe it was fine-

John Warrillow:

How much did you roll, what percentage?

Lee Richter:

I think at the time was 2.5 million. So it was nearly 25% of everything that I was having come in. That’s me rolling the dice at the craps table, but I believed in them so much where they were going and I believed in the mission and I wanted to be part of the bigger mission. So I was very fortunate that when they did go back to the bargaining table and it was less than 12 months later, and they were consolidated and chosen by a bigger company, then I was part of that as well. And this was a multi-billion dollar deal being bought out by an even bigger multi-billion dollar deal, and I was able to be on the inside and be part of the contracts and be part of the negotiations and also reap the benefits on the other side of the know-how and the learning and the increase in value.

John Warrillow:

How did that end up working out for you? You mentioned that you invested 2.5. Did you get your money back?

Lee Richter:

It was just over double in just under two years.

John Warrillow:

Wow.

Lee Richter:

Yeah, I’d say closer to one year by the time we got paid out, so it was about a year. And since then, there’s even been a couple of little bit residual checks that have come in as well, little bonuses.

John Warrillow:

It’s amazing. And so the five, so you took two and a half, rolled it into this new entity-

Lee Richter:

And I got 5.1 out.

John Warrillow:

Somewhere between a year and two, it was worth what? From 2.5 to five. And then did you take the five out or what did you do with it?

Lee Richter:

John, you are so smart to ask these deep questions. I know I actually asked for a third bite of the apple, and I asked if I could keep another seven figures in and it’s in there right now and is playing with the big boys. And what’s beautiful about that, there’s some little side notes, number one, that I’m still part of it, but number two, I get to see the quarterly reports, I get to see inside of how does a more than $7 billion company function, how do they look at things? What are they looking at in the future? Because I’m one of the owners. And to think that there were hundreds and hundreds of vet hospitals that had the same opportunity and they just didn’t know to ask, I’m glad I had mentors in my life who opened the idea for me, through them telling their stories.

Lee Richter:

Just like this, and listening to your show, John, someone could say one little thing and you’re like, “Wow, that’s now a multi-million dollar idea, just because I asked.” And John, what was so important about that extra $5.1 million that came my way and second bite at the apple, is it came during a pandemic. It came when everyone’s thoughts were low, it came at a time where people were scared, it came in a time when we didn’t know if we would physically be open or be able to pay our team that we love and adore. And we want to keep them healthy, and we want to keep them happy, and we want to keep them fed, their mind, body and spirit. We want them happy, we want them fed.

Lee Richter:

So when that came in, I was able to look at my husband and say, “You’re covered for the whole year no matter what happens. If you have close, if you don’t, we’re covered, the team is covered, don’t even think about it.” There were no PPE loans, there weren’t any conversations about that, but it gave us time to rest. And I’ll tell you the next day… And it’s not like we didn’t have the money, but it was extra money that came in, and because it came in right when we needed it most, it just made it that we didn’t have to worry. It was just like found money, we don’t have to worry, we weren’t building it into our future, but we could use it for our present to give us safety, security, and peace of mind.

Lee Richter:

But it also gave our team that because they didn’t have to worry, were they getting paid? Were they going to be fed?

John Warrillow:

Okay. Now I’m a little confused because you sold the company, I’m assuming the obligation to pay the payroll-

Lee Richter:

I still have the Holistic Vet Care.

John Warrillow:

Ah, I see. So you didn’t sell Holistic Vet Care, it was a separate entity?

Lee Richter:

Ironically, originally, I was going to sell it in there, and I think that’s part of the reason why I was getting such a sweet 10 times even a deal is because I had this big, beautiful idea, however, I did show all the value in the general hospital and it was worth every penny. And I decided for it to have a life and go where it needed, if my husband focused 100% on this one thing, how great could it be? And what I’ve learned in the last three years is mind-blowing phenomenal. And so what I do is I ask my husband, “What if we keep this brand, you make it your home base and rather than putting you out to pasture or retiring,” he was like 49 at the time, I’m like, “You’re still in your ’40s, you don’t want to retire. So why don’t we take this and run with it and see what happens?”

Lee Richter:

And in three years, we’ve more than tripled, just because we’re so deeply focused on it, because we have products that have come out, because our team is there, because we’re running on all pistons, 100% happy, so it’s working. So now we’re reaping the benefits of inch wide mile deep on this one for Gary. So him as a doctor, he could be inch wide mile deep just in Holistic Vet Care. And of course, he still does general practice, he’s still doing surgeries and things like that, but when he’s really focused on his Holistic Vet Care, that’s the brilliance. And so now it’s just showing up in so many ways bigger and better than it ever was imagined, ever.

John Warrillow:

Yeah. It’s interesting, it sounds like you and Gary have a great relationship, based on what you have described, it sounds like me to me, correct me if I’m getting this wrong, but he is the master craftsman. He is the technician, the brilliant doctor who is doing the work, whereas you are the brilliant brains behind the business. Am I getting that right to think of it in those terms?

Lee Richter:

I love that you stated that. I could have two ways if you’d like me to share, one of them is how Dan Sullivan sees it from strategic coach, and how he sees it is in the best partnerships. The brain and the talent, which my husband is the brain and the talent in medicine for animals, the brain and the talent is allowed to show up just as the talent. And so what I’ve done is I’ve created a team around him, me included, it allows him to just be inch wide mile deep just in medicine. He doesn’t have to think about managing the team, he works with the team.

Lee Richter:

He has a manager managing the team. He doesn’t have to think about operations or retail because he has somebody else doing that. They have his back so he could show up as the talent. So my whole life with him has been… Literally, I’ve known him since high school, since he was 17 years old, watching him go through, and I went through with him, 10 years of school, which was undergrad, grad, and then veterinary school. And we were at University of Florida for 10 years, Florida Gators national champs, while we were there, it was a great place to be, but he always knew he wanted to practice with like-minded people in Berkeley, California.

Lee Richter:

So we were always eye on the prize to be with like-minded people. So even though we were in Florida, his vision was, “I’m going to be in Berkeley, I’m going to be practicing with vegan veterinarians,” which he’s a vegan veterinarian. And then he’s like, “I’m going to be with like-minded people and clients are going to appreciate me.” And so what we’ve done is we’ve taken 20 years to really build that out, and now it’s just serving the community. Really, it’s just being in his joy. So yes, I am doing all the other things so he can just be in medicine. And Dan Sullivan says, “Here’s the genius. Here’s the talent.” There’s a simplifier. A simplifier can take a complex concept, drill it down to a step-by-step process, and it’s a brilliance, and we need simplifiers.

Lee Richter:

Those are the ones that are architects and engineers, and they’re doing that. They’re taking a complex concept, drilling it down to bite-sized pieces. And simplifiers love other simplifiers because they speak the same language, and they do all these things great. But eventually, you have to add what I am, which is a multiplier. When you add the multiplier is when the world finds out about what that simplifier can do. The simplifiers will take all day, and they’ll research and they’re going to do all this stuff, but unless they have a multiplier telling the world about it from a great way, not just because they’re a paid PR company, but like from my heart, I believe in what we’re doing, it just magically expands in the world and multiplies.

Lee Richter:

And so, I like I said earlier, can drive people to the customer experience, it’s them through their genius they have to keep them. And that’s that step by step methodical doctor process, and it’s brilliant, and he’s inch wide mile deep on that. And that’s all he has to do. And that’s why he can be so good at it, is because we’ve created a world and ecosystem for him to stay in that genius. And yes, he’ll be here in Maui with me next week because he has a team to cover him, so he can be here too. And he’ll bring our daughter and we’ll make vegan Thanksgiving here in Maui. And we’ve just designed a life that works for us. He can be very focused right now and he’d be very free next week and on his way here.

John Warrillow:

I guess what I’m curious about is how the egos clash or not, like how you stick-handle the relationships, because look, being a doctor 10 years in school, he’s worked hard for this specialization and alternative therapies, you could make a case that he would be very proud of that. Equally, you’ve had some incredible accomplishments. Do you guys butt heads at all? How does that-

Lee Richter:

The only, only thing that ever, ever gets in the way is other people. It’s when we have a team member that starts being whiny or a team member who’s high maintenance, and we have rules we’ve learned along the way, the hard way, which is, don’t do extra for any client, don’t do extra for any team member because when you do the same for everyone, it works great. The minute you do extra, that person turns into some bad behavior, high maintenance. So we have a rule, everyone gets the same treatment now, but it took us years to figure that out. So the only thing we would ever stress about was how to handle other people.

Lee Richter:

And we would say to ourselves over time, “If a team member turns into our pillow talk and is anything but good, then within six months they are gone,” because I don’t want them interfering in our beautiful bubble of life, and if they’re going to be bringing trouble to us either they have to figure it out and straighten it out with the team, or we’ll find a place that’s a better suited place for them because there’s really no room for drama in our place. There’s no room for any drama. It really is a hospital, we’re functioning, we’re a team, we care, but we’re professional.

Lee Richter:

And we had to learn over the years where to put those boundaries because the team gets so close and sometimes we’re talking personal things, but there still has to be boundaries, this is a professional place to be. And so what I do is I put it gatekeeper in charge who’s an adult, and is adulting the team on a daily basis. We all are, even me, I’m still adulting with the team. And that means we’re always leveling up, we’re always learning more, and we’re learning from people like Dan Sullivan, and listening to shows like yours so that we can hear what to do next and be prepared. So we’re pro proactive.

Lee Richter:

So, do our egos get in the way? No. I will tell you, we really honor each other. And because I know how hard it was for him to not only get into veterinary school and get through it, and how serious he took it, he was an incredible student. He didn’t just take notes in class, that night, he came home and typed it, and that Saturday, he’s studying with a study group and they were always like, “We don’t need to just know this to pass the test, we need to know this for our life.” And because they had that commitment and I saw it, I could believe in it more. Right now, I’m actually guiding VCs into bringing innovation to me because we’re doing a moonshot in the pet industry.

Lee Richter:

So I have VCs with funding, and I have companies with innovation coming to me and I’m in deal flow, putting these deals together. And what I’m looking at, the first thing is, is how passionate are they? And who is the team around them? Because I’m investing in people, I’m investing in people. And I think that’s the biggest key is, I’ve invested in my husband as the talent in his place, and I invest in other people in there. Are they the genius at what they do? I want to invest in them, sharing and multiplying that idea in the world.

John Warrillow:

Lee, I got to ask you something.

Lee Richter:

Yes. You’re taking a lot of notes there, John. I see it, I know.

John Warrillow:

I got a lot of notes. I’m just trying to keep up, man. That’s all I’m doing, is trying to keep up.

Lee Richter:

This is my life. That’s the whole thing, it’s just my life. I’m in it for three decades now. I worked at Merrill Lynch-

John Warrillow:

Well, this was where I was going.

Lee Richter:

I was in the financial industry, this is years in the making, it didn’t happen in one day.

John Warrillow:

Okay. Here’s my question. When a lot of people sell a company for $10 million, in your case, 12, a lot of people would say, “Okay, I’m good. Nope, Maui is perfect. I’m good.” And a lot of people would be forced to roll equity into a private equity group. You weren’t forced, you did the opposite. You were like, “Not only am I going to take the cash, I’m actually going to roll a quarter of it into the new entity,” rolling the dice again, and then you make off like a bandit. You double your money in a year. And then, oh, roll the dice again. Now we’re into the third bite of the apple.

John Warrillow:

A lot of people listening to this are just scratching their head and saying, “Lee, enough already, you got enough money. What on earth are you doing?”

Lee Richter:

Why would they say that? You never stop creativity. Well, I will say my husband did have a moment with me where he said, “When is enough enough?” It’s not about the money, it’s about the impact. The thing is, when you’re creating an impact from such a pure place of passion, and now I’m in a pure place of knowing because I’m 20 years in the industry, and I’m in the trenches, and I’m with a veterinarian, and I know how this industry works. I also know what the client needs on the client journey, where they’re asking me the most amount of questions.

Lee Richter:

So it’s me with a passion and I can make a positive impact. But I have the secret weapon. I have the talent, which is Gary. So if I mix those things together, why would I want to stop? I’m just getting started.

John Warrillow:

Okay. But let me push a little bit and I’ll just play the devil’s advocate, but okay. So if you wanted to have a bigger impact, I get it, but why through a commercial vehicle? Why not volunteer for the humane society?

Lee Richter:

We do all kinds of things. I have a family foundation, I just put $500,000 in, to pick any nonprofits I want, that my 16-year-old daughter even wants to support so she can go in and have an impact. So I do that as well, and I have many different ways. I even do Kiva loans with her and have for years so she can have microloans for women around the world. She’s done like eight or nine different countries and empowered other women because she could even just do a loan for $50 and see their world change. And then when they pay it back, she could invest in someone else in a different country.

Lee Richter:

So we’re doing all kinds of things and we’re saving pets lives, which is great. And we also have The Pet and Wildlife Fund, which is our non-profit we launched about 15 years ago. So we’re doing things in there as well for pets and wildlife in need. So what I love is, I could have a positive impact, and earlier, I mentioned one of my friends, Joe Polish, he said, “Make your life easy, lucrative and fun.” I learned that the lucrative part is a machine that helps me do better for other people. And a good friend of mine, Stu McLaren has a company and he took it to multi-millions and he sold it.

Lee Richter:

And by accident, they started another company that’s now, again, over multi-millions because he can do it. But what he said to me is, his goal is that he only lives off 10% of his income and 90% he’s doing for good other places. And he’s been building schools over in Africa with his wife and doing good, not only doing it, but saying it and creating ways that people can join him. So I’m actually on that same path on, how do I make a difference and how do I do good? But also how do I fulfill myself and feel like my passion is being utilized in the world? And so I have sat with myself and said, “Should I do it or not do it?” But I love it, so I’m still doing it.

John Warrillow:

Well, I’m really grateful for you spending some time with me and sharing some of your secrets. So where do people reach out to you, if they wanted to connect with you, what’s the best way to do that?

Lee Richter:

A couple of ways, on my website is Lee… Oh, well, my email is Lee@goasklee.com, but my website is goasklee.com, G-O-A-S-K-L-E-E.com, goasklee.com. And my team is actually launching a new website, so I’m looking forward to it. I hope you guys get to see the new one.

John Warrillow:

Awesome. And we’ll put that in the show notes. Lee Richter, thanks for joining us.

Lee Richter:

Thank you for having me, John. And I would love to follow up on any of these conversations if there’s something else you’d like to dive into.